When independent movies like “Rosemead” travel to a state for tax incentives, they save money but add creative challenges.
On a rainy morning this past January, Roosevelt Avenue in the Flushing neighborhood of Queens was a stream of yellow cabs, honking buses and weaving cyclists. Nearby, a film crew peering out the windows of a Chinese pharmacy discussed how to make all of that invisible.
The film it was making, “Rosemead,” starring Lucy Liu as an immigrant mother with a mentally unwell teenage son, was based on a real-life story and set in the San Gabriel Valley of sunny Southern California. Any signs of the East Coast would need to be hidden. No cabs, no buses, no bare trees and overcast sky.
“That’s a very New York-looking trash can,” said Liz Power, an assistant director, ruefully eyeing the green receptacle just outside the pharmacy’s glass door.
Filming “Rosemead” in Rosemead, Calif., would certainly have been easier. But the producers had decided on New York over California because of tax credits.
According to a survey by The New York Times, states have spent $25 billion on tax incentives over the past two decades to lure Hollywood, often competing against one another. New York State, which writes checks to studios of up to 40 percent of their costs producing a movie or TV show, has handed out more than $7 billion to entice productions from California, which has dedicated more than $3 billion to try to retain them.
The movie industry says the incentives help create jobs and spending in the communities where they film, but economists have long been skeptical of whether they create enough value to justify the taxpayer cost.
How much money have states been spending?
Over the last 20 years, states have given movie and television productions more than $25 billion in filming incentives. Thirty-eight states currently offer some form of incentive. Georgia’s lauded program has poured more than $5 billion into Hollywood since 2015. New York has spent at least $7 billion, and California has dedicated more than $3 billion to try to retain productions.
Why do states want to encourage filming?
Supporters of film incentives see them as an engine for job creation. After all, when productions come to town, they need electricians, hair stylists and many other crew members to make movie magic. Productions also spend money while working — money that trickles through local economies to hotels, diners and dry cleaners.
Are there any downsides?
Incentives can be effective at luring projects. But economists warn that using them to do so is very expensive and offers minimal bang for your buck. Study after study has found that the tax revenue generated by film incentive programs is a quarter, or even a dime, of every dollar invested. In some programs, each job that is directly created can cost taxpayers more than $100,000.
And yet states are handing out cash?
Incentives come in different forms. Many states do offer cash rebates or grants, which are paid out directly to production companies. Other states give some form of a tax credit. Depending on the state, tax credits can be used toward tax liability, converted into a refund or sold.
Wait, studios sell their tax credits?
Yes. Many states offer a transferable tax credit. Studios can then sell those credits to companies with high state-tax liabilities. By selling them, often at a slight discount, studios can cash out and buyers can receive modest tax relief. As a result, companies with minimal ties to the entertainment industry have become a hidden part of the incentive ecosystem.
Who’s buying these credits?
Companies like Best Buy, U.S. Bank and Dr Pepper buy these tax credits from productions. High-net-worth individuals also sometimes purchase them. Consider one example: The production company behind “The Trial of the Chicago 7” received a $5.2 million tax credit from New Jersey that it sold to Apple Inc. for $4.8 million.
Can we track where all this money is going?
It’s hard. This process involves vast sums of tax revenue that states are owed but never collect. Because the money does not come into the state treasury to begin with, it is less obvious that the revenue has been lost. And that can make transferable tax credits politically palatable.
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Source: Movies - nytimes.com
